Chesapeake Energy (CHK)

Adds 2.6 Tcfe for a Reserve Replacement Rate of 659%

Chesapeake began 2005 with estimated proved reserves of 4.902 trillion cubic feet of natural gas equivalent (tcfe) and ended the year with 7.521 tcfe, an increase of 2.619 tcfe, or 53%. Including 237 bcfe of internally estimated proved reserves acquired or to be acquired in previously announced transactions subsequent to December 31, 2005, the company’s pro forma proved reserves as of year-end were 7.758 tcfe.

During 2005, Chesapeake replaced its 469 bcfe of production with an estimated 3.088 tcfe of new proved reserves, for a reserve replacement rate of 659% at a drilling and acquisition cost of $1.74 per thousand cubic feet of natural gas equivalent (mcfe). Reserve replacement through the drillbit was 1.047 tcfe, or 223% of production (including 17 bcfe from performance revisions and 24 bcfe from oil and natural gas price revisions), or 34% of the total increase, at a cost of $1.74 per mcfe. Reserve

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replacement through acquisitions of proved reserves (reduced for 1 bcfe sold during the year) was 2.041 tcfe, or 436% of production and 66% of the total increase, also at a cost of $1.74 per mcfe.

Total costs incurred, including drilling, completion, acquisition, seismic, leasehold, capitalized internal costs, non-cash tax basis step-up from corporate acquisitions ($252 million in 2005, or $0.08 per mcfe, frequently booked as goodwill in the industry), asset retirement obligations and all other miscellaneous costs capitalized to oil and natural gas properties, were $2.40 per mcfe. These costs exclude future development costs of proved undeveloped reserves. A complete reconciliation of finding and acquisition cost information and a roll forward of proved reserves is presented on page 14 of this release.

Of the company’s estimated proved reserves at year-end 2005, 92% were natural gas. Additionally, 65% were proved developed at year-end 2005 compared to 66% in 2004, 74% in 2003, 74% in 2002 and 71% in 2001. By volume, third-party reservoir engineers evaluated 78% of 2005’s estimated proved reserves compared to 75% in 2004, 74% in 2003, 73% in 2002 and 71% in 2001. Given that Chesapeake owns an interest in more than 30,000 wells in the U.S., it would be cost prohibitive for third-party reservoir engineers to evaluate 100% of Chesapeake’s properties.

As of December 31, 2005, Chesapeake’s estimated future net cash flows discounted at 10% before income taxes (PV-10) and after income taxes (standardized measure) from its proved reserves were $22.9 billion and $16.0 billion, respectively, using field differential adjusted prices of $56.41 per bbl (based on a NYMEX year-end price of $61.11 per bbl) and $8.76 per thousand cubic feet (“mcf”) (based on a NYMEX year-end price of $10.08 per mcf). In addition to the PV-10 value of its proved reserves, the book value of the company’s other assets (including drilling rigs, land and buildings, investments in securities and other non-current assets) was $1.3 billion. The 2004 PV-10 and standardized measure of the company’s proved reserves were $10.5 billion and $7.6 billion, respectively, using field differential adjusted prices of $39.91 per bbl (based on a NYMEX year-end price of $43.39 per bbl) and $5.65 per mcf (based on a NYMEX year-end price of $6.18 per mcf). A reconciliation of PV-10 to the standardized measure, which is calculated in accordance with SFAS 69, is presented on page 18 of this release.

Chesapeake’s PV-10 changes by approximately $315 million for every $0.10 per mcf change in gas prices and approximately $50 million for every $1.00 per bbl change in oil prices. The decline rate of the company’s proved developed producing reserves is projected to be 24% in the first year (calculated by comparing 2007 estimated production to 2006 estimated production), 16% in year two, 13% in year three, 11% in year four and 10% in year five for an average annual decline rate of 15% over the next five years.

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